The "Trump Rally" has continued with another 5.91% gain in the broad Morningstar Universe this last quarter. Since the election the S&P is up about 11%. The Fed raised interest rates the .25% as they have been promising for several years and the market yawned. The Fed has intimated that they will raise rates two more times this year. I’m thinking it may only be one more. The more important thing will be to start to shrink the Federal Balance sheet. This can be done by the Feds not buying their own bonds and just letting them mature and be "retired". I believe the market will continue the rise, but at a much slower pace, having already priced in anticipated lower taxes and reduced regulations.
Expect volatility. Most economists still predict GDP growth between 1 ½ to 1 ¾ percent, with inflation running a little over 2%, which is the Fed’s target. All this translates into a continued slow growth environment. The pace of mergers and acquisitions, stock buy backs, and divestures are all up as corporate managers try to use the cash on their balance sheets. Looking at the overall market we are in a Goldilocks environment where the economy is not too hot or too cold. Looking at the global markets the valuations overseas appear cheaper and thus better than the U.S. Because of this we will be looking for some opportunities there and may move to have a heaver weighting than we currently have. Our Global fund managers are already doing this so we may not need to move but we will continue to look at the numbers to make our decisions. We continue to use a value approach and look for well-run companies that we believe are undervalued and wait for the market to see their true value. We will also do our best to ignore the headline news, of both the left and the right, and make our decisions based on company performance, not headlines. We will stick with our long-term investment plans.
In closing, I have two book recommendations: "The Dictators Handbook" by Alastair Smith and Bueno De Mesquita and "Charlie Munger: The Complete Investor" by Tren Griffin. Both books are quite good.
Finally a little humor from Phillis Diller (if you are too young to remember her you might want to go to YouTube):
"The reason the golf pro says to keep your head down is so you can’t see him laughing."
"Housework can’t kill you, but why take the chance?" and finally,
"Burt Reynolds once asked me out. I was in his room".
Thank-you Phyllis and, as usual, we thank you for the opportunity to work for you.
Willis G. Ashby, CFP®
Reference data is from Integra Financial, Inc. research, the WSJ, Morningstar and First Trust.